Kingdom sees boost in foreign reserves

Cambodia's total foreign reserves jumped to US$3 billion in the first half of 2011, up from $2.7 billion at the end of last year, according to the National Bank of Cambodia.

The reserves help to bolster the Kingdom’s financial standing, which in turn draws investor interest and allows for greater bargaining leverage in debt negotiations, an NBC official said.

“A higher level of reserves can enhance public and investor confidence, and this is very important for banking and financial stability,” director general and spokeswoman Nguon Sokha said yesterday.

The reserves – which are largely in US dollar, though the NBC is trying to diversify its holdings – also can be used to grow the economy, as well as serve as a buffer against regional or global financial crises, she said.

Significant foreign reserves granted the NBC some ability to defend the exchange rate of the riel in circumstances like the 1997 Asian and most recent global financial crises, according to Nguon Sokha.

Economists said the increased reserves indicated an overall improvement in the Cambodian economy, as foreign investment and aid flowed into the country.

“It means Cambodia … is resilient to external negative shocks,” Suzuki Hiroshi, CEO of the Business Research Institute for Cambodia, said yesterday.

He noted that the $3 billion represented enough reserves for the Kingdom to purchase up to four months worth of needed imports, when three months was the norm.

Cambodia Economic Association president Chan Sophal cautioned against holding too high a reserve total. The NBC instead should put some of those reserves to work in other ways, he said, such as reducing the country’s trade deficit.

However, Nguon Sokha emphasised that Cambodia’s reserve level was not too high. “Other countries hold more reserves than this,” she said.

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